Rival bids on the cards as Electra rejects 3i's offer

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The Independent Online
3i YESTERDAY said its 700p-a-share takeover offer for Electra Investment Trust, aimed at forming a pounds 5bn venture capital company, had been rebuffed amid reports that other parties had expressed an interest in placing rival bids.

The rejection came at the end of three weeks of boardroom haggling over the value of Electra's assets and its 50 per cent stake in Electra Fleming, the investment manager of the trust.

"It is true that a proposal which in our view fully values the company has been rejected. Right now talks are deadlocked. We await a response to a formal communication made with Electra by our chairman," said a spokesman for 3i.

Following yesterday's rejection, 3i executives met to consider whether to raise the offer, which values Electra at pounds 1,235m. 3i has so far hinted that this represents a premium to the value of Electra's assets.

Independent analysts have put the net asset value of Electra at 685.8p a share. At yesterday's close of 682.5p, that puts the shares at a slight premium to net asset value. Electra says its own calculations value its assets at well above 700p a share. The two also differ on Electra's claim that its stake in Electra Fleming is worth pounds 30m, a figure built into the asset calculation. The figure includes a goodwill element of more than pounds 25m.

As traders anticipated a raised offer or an alternative bid, shares in Electra fell just 1.9 per cent yesterday, still 20 per cent higher than their value before the bid was disclosed.

Observers yesterday said Electra was "playing a risky game" because of the potential shareholder anger if the deal fails to materialise. Before news of the talks, shares in the trust were trading at a 20 per cent discount to asset value.

A source close to Electra said the trust would restructure in any event. "I think it is generally accepted at Electra that life is never going to the the same again. It probably doesn't have a very long shelf life. If it isn't 3i, it's going to be someone else. The ball's in their court"

Speculation yesterday centred on GE Capital, the US financial services giant.